The Rule of 72: doubling takes a return, not just 72 months
The Rule of 72 is a useful mental shortcut: divide 72 by an annual percentage return to estimate how many years a lump sum takes to double. At a steady 6%, that is about 12 years. It is not a promise that an investment doubles every 72 months.
The number 72 months means six years. Doubling in six years would require about 12% by the shortcut, or 12.25% annually using exact annual compounding. That is an assumption to examine, not a return to expect from a stock fund. Actual markets do not deliver the same return each year. The SEC's compound-interest explanation introduces the shortcut.
Follow one hypothetical $1,000
These examples assume no added deposits, withdrawals, taxes or fees and a constant annual return. They are calculations, not actual customer results.
| Assumed annual return | Rule of 72 estimate | Exact time to double with annual compounding |
|---|---|---|
| 3% | 24 years | 23.45 years |
| 6% | 12 years | 11.90 years |
| 8% | 9 years | 9.01 years |
| 12% | 6 years | 6.12 years |
At 6%, $1,000 becomes approximately $2,012 after 12 years and $4,049 after 24 years. The growth builds on earlier growth. The exact formula is starting amount × (1 + return)^years; exact doubling time is ln(2) ÷ ln(1 + return). Use the return as a decimal in the exact formulas.
The shortcut is less reliable at very high rates and does not produce a meaningful positive doubling time at zero or negative returns. Adding contributions can make your account balance double sooner, but that is not the same as the original investment earning a doubling return. Keep deposits and growth separate.
Doubling dollars is not the same as doubling buying power
Suppose returns are 6% and inflation is 3% every year. The exact inflation-adjusted annual growth rate is 1.06 ÷ 1.03 − 1, or about 2.91%, before fees and taxes. After 12 years, the roughly $2,012 balance buys about $1,411 in starting-year dollars. It did not double purchasing power.
At steady 3% inflation, prices double in roughly 24 years by the same shortcut. This helps explain why long-term planning needs growth as well as saving. It does not justify gambling essential money on a promised high return. Inflation and investment returns vary, and a cash reserve has a useful job even when its return trails inflation.
Try these assumptions in the free Index Investing Scenario Explorer. Its chart separates contributed money, nominal balance and inflation-adjusted value. For the investment approach behind a diversified portfolio, see our Bogleheads guide.
Your employer match and investment growth are different benefits
A workplace 401(k) may add an employer contribution when you contribute. Read the formula, eligible-pay definition, vesting schedule and whether matching is calculated each paycheck or includes an annual true-up. “Max the match” means contributing enough to receive the full match you qualify for. It does not necessarily mean contributing the maximum amount allowed by tax law.
Capturing an available match can be valuable, but your plan still needs to leave room for essential bills, medical needs and a workable cash reserve. Increasing contributions too quickly can create expensive borrowing elsewhere. If affordable, start with the full eligible match, then evaluate additional retirement saving against your other priorities. Our 401(k) match guide for overtime pay walks through the plan details.
Fictional plan example: an employee contributes $1,000 and the employer matches 50% of that contribution, with all of it inside the plan's matching limit. That adds $500, making $1,500 before investment gains or losses. Employer money may be subject to vesting. The $500 is compensation under the plan, not proof of a 50% market return that repeats annually on the whole account.
What a $1,000 traditional 401(k) contribution can do to taxes
Assume an eligible employee contributes $1,000 of pretax pay to a traditional 401(k), and all $1,000 would otherwise fall in the 22% federal marginal income-tax bracket. Ignore state taxes, credits, phaseouts and other interactions for this example.
| Item | Illustrative amount |
|---|---|
| Contribution placed in the traditional 401(k) | $1,000 |
| Current federal income-tax reduction: $1,000 × 22% | $220 |
| Reduction in take-home pay after that federal tax effect | $780 |
The $220 is a tax reduction, not a $1,000 tax refund. Actual withholding and the final return can differ. Pretax employee deferrals generally still incur Social Security and Medicare taxes. Roth 401(k) contributions do not provide this current federal income-tax exclusion. IRS contribution tax treatment.
Traditional withdrawals generally become taxable later; early distributions can have additional tax unless an exception applies. The deduction may reduce tax while leaving you in the same bracket. Do not decide between Roth and traditional solely from today's refund. Compare current and possible future tax circumstances with a qualified professional and your actual plan. See Roth versus traditional when income changes.
The practical next step is modest: confirm the match you can receive, choose an affordable contribution, make sure the money is actually invested as intended, and revisit the plan as pay changes. No doubling shortcut replaces those steps.
Sources checked September 28–29, 2026. AI-assisted content; publication authorized by Paul Foster. How FSF creates articles.
Editorial attribution: Paul Foster
Published: September 29, 2026